How did you set up distributions from your trust?

[SavinMaven]

We're in our early forties and finally completing estate planning, including a revocable trust. Our kids are school-age now, and obviously we hope to live decades more but should the worst come to pass, and we're both dead, the attorney is recommending setting it up this way:

1) That the trustee (person controlling the money) and guardian (person responsible for the kids) are the same person (they can be different if we want them to be),

2) That the trustee control all funds until the kids hit certain age thresholds, and

3) That each kid get 1/3 of their share of the money at age 25, 1/3 at age 30, and 1/3 at age 35.

For context if we died today our total estate is approx 3.5M (most of which is life insurance on us both - that is not our net worth while alive! I wish!) and the kids are 4 years apart in age.

How did you set up disbursements from a trust?

[Gin1984]

Our guardian and our trustee are different.  In fact, the trustee is a fellow mustachian. The guardian gets the money from social security and our trustee knows that we want private school and obviously the normal costs are increased household and will give that out.  They have the ability to give more but know we want it to last through both kid's college.
Our kids are also four years apart (5 and 1), though our total estate is much less than yours.

[maizefolk]

1) This really depends on the type of people you have in your life. Splitting trustee and guardian can make sense when you have a person you trust to have the capacity and personal qualities to care for and raise your children, but they're not great with money. If you have a person who is both good with money, someone you trust with your children's raising, and who is willing to undertake that responsibility and all three are the same person it does cut down on painful logistics and potential friction if both roles are in the same person.

2 & 3) Your attorney's advice here is pretty standard. I'd be inclined to shift the disbursement ages earlier as my view is the people who aren't going to be responsible with money at 30 likely aren't ever going to be.

4) Think about and document what you consider to be "fair" because well meaning people people can mean completely contradictory things by that simple word. If one child's college costs much more than the others' does -- or one attends college and the other does not -- that come out of that child's share of any remainder that would be distributed at 25;30;35 or equally from both? If the trustee were to decide that there was a good reason for distributions of funds to one child or the other in their 20s for reasons other than college (health crisis, unemployment, etc), should that be handled the same way as college costs or differently? It's terrible to think about, but if one child were to die between the ages of 25 and 35 after having children of their own, should their share of future trust distributions go to that child's sibling or their children?

Generally on trusts, try to make the language as simple as possible, but no simpler. There are a couple of trusts I've seen where the original folks tried to do rather complex things to (they thought) increase fairness and guard against undesirable outcomes down through the generations, but ended up producing undesired consequences (churning of funds by an institutional trustee that the beneficiaries couldn't remove in one case, people playing games to drain a trust where the income was supposed to go to one person and the assets to another after the first's death).

[Chrissy]

Your attorney's recommendations sound pretty standard.  In our case, the guardians are also the trustees, but Husband didn't want the money spent at all:  not for lessons for the kids, not to continue private school, not to upgrade their house or cars (to accommodate our children!).  He was totally unreasonable about it.  However, the guardians would get the Social Security, so $4k/mo.  And they're well-off as it is, and they agreed to this in advance, so okay.

In his defense, if we inherited their children, he's said we would spend our own money on them and not from their trust, because they're "ours" now.

We put in that the money could be used for education (including tuition, on-campus housing, books, supplies, study abroad, etc) starting at age 16, but each child is only entitled to 4% of the total gross per year for that.  Upon completion of a Bachelor's or discontinuing their education, the trustee may only distribute funds to maintain or preserve the health of the child.  We did one distribution:  when the youngest is 25 the remainder is divided equally, INCLUSIVE of the amount that each used for education.  Again, Husband's stipulation.  He really wanted to incentivize getting an education quickly and getting out into the world.

[GizmoTX]

We did not have the guardian & the trustee be the same person for our son's trust, and specified 3 of each in series, in case our subsequent choice could not serve. We are currently the trustee.
Distribution "may happen for the health, welfare, or education" of the beneficiary"; "will happen" implies annual distributions, which we did not want to force.
Our primary intent was to fund education & legally avoid the kiddie tax. If there was a residual, then DS could opt to receive 1/3 upon earning a BS or BA degree or certified trade, then the next 1/3 at age 30, & the remainder at age 35. DS is now 25, a graduate, & the trust is mostly intact because he earned numerous scholarships. He has opted to leave most of the trust invested in the trust, & will most likely use it to start a business, purchase a house, or benefit eventual children. We have gifted funds to the trust over the years & DS won't need a prenup for the trust as long as he doesn't contribute community property funds.